Divorce after Bankruptcy

It may not come as a surprise to you that two of life's most stressful events, getting divorced and filing for bankruptcy, often happen in tandem. If you and your spouse are considering separating because of your financial distress, you're probably concerned about how your bankruptcy might affect your divorce.

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When Bankruptcy and Divorce Intersect

So what should you prepare for if you and your spouse are considering bankruptcy and now might be headed toward divorce? Here are some of the basics about debt, divorce and bankruptcy.

Joint debt in divorce: If both you and your spouse are listed on a debt (e.g. if you jointly took out a mortgage or car loan), you may both be responsible for that debt even after you get a divorce. In other words, even if the court deems that one spouse is responsible for paying, the credit of both spouses might be affected should the loan go into default.

Chapter 13 bankruptcy in divorce: Because of your legal debt obligations, it may be wise to work out an official agreement with your spouse about who is responsible for what debts. Keep in mind that, while enlisting the help of the lawyer to help you with this agreement may be smart, your bankruptcy lawyer cannot do that job, because…

Your bankruptcy lawyer represents both of you: This becomes important especially if you want to divorce during the three- to five-year repayment period of a Chapter 13 case. Your bankruptcy lawyer cannot act in a way that is detrimental to either of you, so if you want to legally divide payment responsibilities, look to another lawyer.

You are still required to stick to your repayment plan: If someone misses a payment for the Chapter 13 repayment plan, your bankruptcy trustee can move to dismiss your case – and therefore remove the court's protection and your chances of getting a bankruptcy discharge. So keep communication lines between you and your spouse open.

If your relationship with your spouse is not conducive to regular contact concerning debt payments or adherence to your bankruptcy repayment plan, you may be able to file a motion to have your case modified.

Conversions in bankruptcy: One option you and your spouse might have is to convert a case from a Chapter 13 to a Chapter 7 bankruptcy.

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